Delisting of Moribund Stocks Imminent
Usually reliable sources have confirmed to us that subsequent to the Council meeting of the Nigerian stock Exchange on Monday this week, a list of stocks that have been subjected to the necessary due process for delisting may be announced anytime soon.
A cursory look at candidates for delisting suggest that stocks in the aviation and textile sectors may be affected. Some firms like Onwuka Hi-tek are expected to make the list as well as one of the firms which have been in the news lately.
We understand that one of the firms in the textile sector may be in the final stages of discussions/negotiations with a frontline entrepreneur and owner of a group of companies who have indicated interest in buying the company and turning it around. This could not come at a better time.
The list has an unconfirmed list of no less than 18 names, though it is expected that the announcements may be in batches.
It will be recalled that the Director General of the Nigerian Stock Exchange, Dr. (Mrs.) Ndi Okereke-Onyuike had hinted as much at a parley with members of the capital market correspondents association.
Zinox set to list on the Nigerian Stock Exchange
Zinox, which recently recapitalised with over N3.5 billion and acquired Technology Distributions Limited and Task Systems to form a conglomerate; intends to approach the stock exchange for listing as a publicly quoted company.
SEC, NSE strategies to sanitise capital market
By Gbanga Agbana
ISSUES bordering on the sanitisation of the capital market formed the fulcrum of a Stakeholders Conference held among capital market operators last week in Lagos.
Most importantly, the Securities and Exchange Commission (SEC), and the Nigerian Stock Exchange (NSE), regulators of the capital market reiterated their commitments to work assiduously to promote the growth of the capital market, which is the barometre that measures the growth of the country's economy.
For instance, last week witnessed a truce between the two regulators on the suspension of trading on Afroil and Capital Oil Plc, thus putting paid to the speculation on the fact that the two regulators were at loggerheads on the issue.
SEC had issued a statement that the two companies have been suspended from trading, but the order was not carried out immediately by the stock exchange which encouraged stockbrokers to trade on the stock until last Thursday, when it was eventually put on full suspension.
Also, also week, the Nigerian Stock Exchange Director-General, Professor Ndi-Okereke Onyiuke promised investors that from January 2, 2008, the issue of issuance of share certificate would become history in the capital market, to minimise the problems associated with verification with registrars.
She also charged registrars to update their facilities, especially in the areas of IT infrastructures so that they can cope with the needs of recent initial public offerings, and allotment procedures.
SEC, on its part, according to its Deputy Director, and Senior Special Assistant to the Director-General, Mr. Bala Usman, reiterated SEC's commitment to go ahead with the non-going probe on the share price increase of some quoted companies would soon be concluded, adding that the commission is poised to sanitise the capital market to encourage investors.
The Securities and Exchange Commission (SEC) had ordered the immediate suspension of trading in shares of Afroil Plc and Capital Oil Plc on the floors of the Nigerian Stock Exchange (NSE), with a view to protect the investing public.
By this directive, which was contained in a letter to the NSE, all stockbrokers are also directed not to deal in the shares of these two companies.
The decision of the Commission to order the suspension of trading on Afroil Plc and Capital Oil Plc was a fall out of the investigation recently conducted on these two companies, due to observed astronomical rise in the share prices and the fact that they were not in business, as there was no activity whatsoever in their premises.
The Commission has declared that the basis for continued trading and rise in the prices of their shares on the NSE no longer exists, adding that the investing public must not be deceived.
SEC therefore added that pursuant to its findings on the two companies and its mandate in protecting the investing public, trading in the stocks of the companies is suspended immediately.
Sequel to its statement of February 14, 2008 to the effect that investigation would be carried out on the unusual price movements in the shares of the two companies and others, the investigation was concluded with some findings that led to the suspension of the two companies.
For Afroil Plc, the Commission stated that the company accessed the capital market in 1993, through an Initial Public Offer (IPO) for subscription of 165 million ordinary shares of 20 kobo, at 40 kobo per share. The offer was undersubscribed by 42.26 per cent or 69.73 million shares, which were warehoused for subsequent disposal on the NSE.
The investigation of the company by SEC revealed that between 2001 and 2006, the company was wound up by a Federal High Court Lagos order, dated March 30, 2001 following its inability to pay its debts, pursuant to the provisions of the CAMA 1990. But the winding up order was vacated in March 2007, following the decision of KS Fund Managers Limited (one of the creditors) to take over the responsibility of paying other creditors, while the company is returned to KS Fund Managers. The warehoused shares of the company were in custody of the company's management.
The investigation also revealed that Afroil did not notify the Commission and the public of the development, while its shares remained quoted on the Stock Exchange and transactions were going on the shares.
The Commission found the sale of the company's warehoused shares within this period as quite anomalous, as it ceased to be a going concern between 2001 and June 2006 while it returned to going concern status on March 3, 2007. It added that by the winding up order, its shares should have been de-listed from the official list of the NSE, while the Commission could not establish any basis for the steady rise in the company's share price.
The Commission therefore noted the actions of the management of Afroil Plc as acts of insider dealing and price manipulation, and therefore a breach of Rule 110 of the Commission's Rules and Regulations. In addition the manner of the sale of the company's warehoused shares was a total breach of the provisions of Rule 70(2) of the Commission's Rule and Regulations, which states that warehoused shares be sold en-bloc, while the broker renders periodic reports on it.
The Commission observed that Capital Oil Plc has similar antecedents with Afroil Plc, except that no evidence was discovered to prove that it went into liquidation but the company was not in active operation and only occupies an obscure office accommodation in Ikeja, Lagos.
The commission, however, found that what triggered the volume of transactions in the company's shares was the sale by Five Star Asset Management Limited, of 38,708,520 shares of the company on the floor of the Exchange to APT Securities Limited, at the price of N1.39 and the securities firm subsequently did a cross deal of 70 million shares of the company at various prices, ranging from N3.53 and N11.68. The transactions were executed between December 12, 2007 and January 28, 2008. The sales were made to various clients.
However, the Commission noted that the chairman of Capital Oil Plc also sold 8.25 million of his holding, within the same period. "In view of the fact that the chairman of the company was an insider, he was quite in the picture of the company's situation and in fact knew that the prevailing share price is without rational basis and therefore unsustainable when he went ahead sell his holding."
The Commission therefore considers his action as an insider abuse, allegedly taken to minimise his loss and maximise his gains from the price surge, fully aware that the company is not in operation.
Further disciplinary action is being considered regarding individuals and organisations with established active role in this saga.
Generally, investments in stocks are done for specific purposes, which include expectations of returns in terms of dividends, bonus issues and earnings.
However, for some investors, it has been a sad tale since they have not benefited in any form from 61 of 216 listed equities on the Nigerian Stock Exchange in most cases in the last few years.
To informed shareholders, investors should not just buy-off the shelve, but they should consult their stockbrokers/dealers and investment advisers or at least other informed investors before investing in non-existent companies.
Without mincing words, for investors in 61 out of the companies quoted on the Nigerian Stock Exchange, the story has not been palatable in the last few years in terms of returns on investment especially capital appreciation, dividend and bonus issues, and earnings per share.
Specifically, most of these companies have not submitted their result to the Nigerian Stock Exchange since 1986 or the 1990s, which is against the post-listing requirements of the Nigerian Stock Exchange. Yet they have not given investors any returns.
Ironically, some of them have enjoyed capital appreciation in the last few months alongside other companies that have good track records, which have given adequate and prompt returns to investors. These companies suppose to submit their results every six months for emerging market companies and quarterly for first tier companies to the stock exchange.
The moribund companies, which have enjoyed tremendous capital appreciation, include Afrioil Plc, Liz Olofin Plc, and Capital Oil Plc among others.
Specially, the share price of Capital Oil Plc has risen so far this year from a low N5.42 to a high N17.50 before falling to N17.50, while that of Afroil Plc rose from N8.96 to N27.46 and that of Liz Olofin rose to N4.07 from a low N1.74, among others. Some of these moribund companies have even ceased to exist like Aboseldehyde Plc, among others.
The development had called for suspect by the Securities and Exchange Commission (SEC), which began investigation in February into why some share prices were rising indiscriminately.
Specifically, the share price of African Petroleum Plc, Afroil Plc, Capital Oil Plc, IPWA Plc among others were being investigated and the result of SEC is still being awaited by operators and investors.
As at yesterday, the moribund companies included 13 in the emerging markets sub-sector and 48 in the first-tier sub-sector.
The companies include Afrik Pharmaceuticals Plc, Animo International Plc, Capital Oil Plc, Flexible Packaging Plc, Krabo Nigeria Plc, Newpak Plc, Rak Unity Petroleum Company Plc, Rokana Plc, Smart Products Nigeria Plc, Tropical Petroleum Plc, Udoefson Garment Plc, Union Ventures Plc, West African Aluminium Products Plc, among others, all in the second-tier market.
In the first-tier market, we have Okitipupa Oil Palm Plc, Incar Plc, Intra Motors Plc, Albarka Air Plc, Aviation Development Company Plc, Golden Guinea Breweries Plc, Premier Breweries Plc, Ceramic Manufacturers Plc, Nigeriacem Plc, IPWA Plc, Premier Paints Plc, Atlas Nigeria Plc, Hallmark Paper Products Plc, Arbico Plc, Interlinked Technologies Plc, Nigerian Wire & Cable Plc, Onwuka Hi-Tech Plc, Beverages West Africa Plc, Tate Industries Plc, UTC Plc, Daily Times Plc, Aba Textiles Plc among others.
Lamenting investors' plight, the President of the Association for the Advancement of the Right of Nigerian Shareholders (AARNS), Dr. Farouk Umar said: "Some people are just buying into the companies because they don't know about them. They like buying private placements sometimes, but they will have themselves to blame. People should always seek advice before buying into any stock, especially the ones they don't know very well or have much information about."
To Sunny Nwosu, the president of the Independent Shareholders Association of Nigeria (ISAN), some investors are buying into the companies because of the belief that they will bounce back someday.
He said: "The moribund companies are few. Before now, they were more than these. Some of them have bounced back. We believe that one day, one core investor will come in, buy them and turn them around."
The spokesperson of the Nigerian Stock Exchange (NSE), Mr. Sola Oni, shared the views of Nwosu. He explained that some investors are buying these stocks because they are cheap, and with the hope that if they should experience any turnaround, they will make their money.
His words: "Some investors prefer to buy these stocks into their portfolio in order to make money later. There is no were in the world where companies perform at the same level."
He continued: "Some investors prefer junk stock for other reasons, which included the fact that they are cheap; prospect for returns in future; expectation that they will ounce back like the case of Champion Breweries. Also the process of delistment is cumbersome."
Meanwhile, Oni explained that the stock exchange has set up a monitoring team to check the companies with a view of knowing what is wrong with them and the way out.
The way out of the problem, according to Farouk, is that investors should generally seek investment advise from stockbrokers and other experienced people before investing in any stock at all so that they won't buy into non-existent companies or those that will never give any return in the short-run or long run.
His words: "Investors should not buy shares off the shelve without seeking advise from experts and stockbrokers. Sometimes people are pennywise pound-foolish. They see a stock of N1 and buy it and leave that one of N50 with track record. It is better to buy that of N50 per unit like First Bank with track record and get returns. When you don't have results for many years, you may be hurting yourself. The moribund companies are not good for the market, because the moment the stocks crash, it will discourage people from investing in the market."
"Now banks are giving money to people to invest and they should invest wisely so as not to burn their fingers. The NSE and SEC should watch the stocks and see who is buying when stocks that are non-performing rise in price. The bandwagon effect will make stocks crash and have people lose money. We saw what happened in China and the United States. We don't pray for that here."
Source:
www.guardiannewsngr.com (March 31, 2008)
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Fidelity Bank Plc's Allotment Schedule[1].pdf (21.43 KB - downloaded )
For the future that is, have always been a bit interested in the stock market 
